New study says 'Medicare for All' will save the U.S. money with lower healthcare costs

As the debate over how to lower healthcare costs in the U.S. continues, including whether "Medicare for All" is the answer, a new study finds a consensus that a single-payer system would result in savings.

A single-payer healthcare system would save money over time—and likely even during the first year—according to a review of 22 analyses of both national and state single-payer proposals made over the past 30 years, according to a study published Wednesday in PLOS Medicine.

The study is the first of its kind that reviewed analyses of single-payer proposals and provides strong evidence that Medicare for All would be financially affordable for the U.S., said the study’s first author Christopher Cai, a third-year medical student at the University of California, San Francisco (UCSF), in an interview with FierceHealthcare.

To study the consequences of what would happen if the U.S. adopted a single-payer system, researchers from the University of California in San Francisco, Los Angeles and Berkeley examined 22 economic analyses by government, business and academic organizations of national and state-level single-payer plans, including proposals made in Massachusetts, California, Maryland, Vermont, Minnesota, Pennsylvania, New York and Oregon.

These analyses were used by policymakers to evaluate the proposals, estimating savings the plans would create through simplified billing and lower drug costs while also taking into account increases in health spending that would arise as newly insured people sought healthcare, the study said.

Nineteen of the studies showed the U.S. would save money in the first year of adoption, averaging 3.5% of total healthcare spending, and all of the studies showed healthcare savings in the long term. The greatest source of savings comes from reduced administrative costs, with further savings from lower drug costs, the study found.

The models were created by analysts from different political perspectives, and they provided a range of cost estimates in the first year of operation, from 7% higher to 15% lower.

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In the long term, savings from simplified payment administration and reductions in drug prices and other efficiencies ranged from 3% to 27%, with the largest savings found in plans that lowered drug costs, the study said.

Actual costs and savings will depend on features and implementation under a specific proposal.

Under proposed single-payer plans, such as Medicare for All, a unified public financing system would replace private insurance, similar to the healthcare system in Canada and many other wealthy countries.

A separate study released last week in the Annals of Internal Medicine that compared U.S. administrative healthcare costs with that of neighboring Canada indicated the U.S. would save $600 billion in costs by switching to a single-payer system.

Medicare for All has generated discussion in the seven Democratic presidential debates held so far. Candidates Bernie Sanders, a senator from Vermont, and Elizabeth Warren, a senator from Massachusetts, both support Medicare for All proposals, while some other candidates favor building on the Affordable Care Act.

The PLOS study could help bolster the argument for Medicare for All. “It’s always our hope that elected officials will spread accurate information. If you watched the [Democratic presidential] debate last night, a lot of people were referencing that Medicare for All will cost more and we can’t afford it. In light of this evidence, I think that’s simply not true,” said Cai, who disclosed as part of the study that he is an executive board member of Students for a National Health Program, a group that supports a single-payer system.

“Obviously, I have personal opinions about healthcare reform,” he said, adding that the study included a broad group of authors from both sides of the debate who all made disclosures of any potential conflicts. The study underwent a peer-review process.

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“The strength of our review is it looked at single-payer proposals in a lot of different contexts and shows a pretty clear consensus. We looked at both studies from conservative-leaning and liberal-leaning think tanks and organizations and all the studies showed savings over time,” he said. Studies authored by those with liberal-leanings were more likely to show more generous savings, but analyses supported by more conservative funders or performed outside of academia still predicted single-payer systems would yield savings.

The nonpartisan Congressional Budget Office (CBO) said in a report last year that total spending under a single-payer system might be higher or lower than under the current system depending on the key features of a new system, such as payment rates for hospitals and doctors and whether patients would pay part of the cost of care.

The CBO didn’t actually offer up specific cost estimates on any of the Medicare for All proposals floating around, though one estimate put Sanders’ Medicare for All plan at between $32.6 trillion and $38.8 trillion over the first decade.

In the PLOS study, researchers estimated longer-term savings by using cost projections made in 10 of the models, which looked as far as 11 years into the future. These studies assumed that savings would grow over time, as the increases in healthcare use by the newly insured leveled off and the global budgets adopted by single-payer systems helped constrain costs.

By the tenth year, all modeled single-payer systems would save money, even those that projected costs would initially increase, according to the study.

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“Even though they start with different single designs and modeling assumptions, the vast majority of these studies all come to the same conclusion,” said study author James Kahn, M.D., a professor in the UCSF Department of Epidemiology and Biostatistics and a member of the Philip R. Lee Health Policy Institute, in an announcement. “This suggests that fears that a single-payer system would increase costs are likely misplaced.”

Higher initial costs were associated with plans that had low co-pays or none at all, offered rich benefits or that did not expect savings from lower drug and medical equipment costs, the study found.